Practice Questions
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What does a trade deficit indicate in a country's current account?
A trade deficit means a country buys more goods from other countries than it sells to them. Other options are incorrect because This option suggests t...
What is the relationship between trade balance and balance of payments in an economy?
When a country sells more than it buys from others, it has a trade surplus. Other options are incorrect because Some might think a trade deficit doesn...
How does a country's trade deficit interact with its net income from abroad to affect its current account balance?
A trade deficit means a country buys more from others than it sells. Other options are incorrect because Some people think a trade deficit always mean...
How does a country's current account balance relate to its trade balance and foreign investment activities?
A current account deficit means a country spends more on foreign goods and services than it earns. Other options are incorrect because People might th...
How does the capital account relate to the current account and the trade balance in the context of international trade and the savings-investment balance?
When a country has more money coming in from investments than going out, it shows a surplus in the capital account. Other options are incorrect becaus...
What does the current account in a country's balance of payments primarily measure?
The current account tracks how much a country sells and buys with other countries. Other options are incorrect because Some might think the current ac...
What does a trade surplus indicate about a country's trade balance?
A trade surplus means a country sells more goods to other countries than it buys from them. Other options are incorrect because This option suggests t...
What is the primary impact of an increase in exports on a country's current account balance?
When a country sells more goods to other countries, it earns more money. Other options are incorrect because Some might think that selling more goods ...
Which of the following statements correctly describe the relationship between U.S. real income and the current account balance? Select all that apply.
All the statements provided misunderstand how real income affects trade and the current account. Other options are incorrect because This suggests tha...
If the U.S. experiences an increase in real income, which of the following is the most likely underlying cause for a potential current account deficit?
When people earn more money, they tend to spend more. Other options are incorrect because Some might think that a stronger dollar means we sell less t...
When U.S. real income increases, it typically leads to a _____ in the current account due to higher imports from countries like the European Union.
When people in the U.S. Other options are incorrect because A surplus means the U.S; A balance means imports and exports are equal....
How does an increase in U.S. real income impact the current account balance, particularly in relation to trade with the EU?
When people in the U.S. Other options are incorrect because This answer suggests that more income means less buying from the EU; This option thinks in...
After a significant increase in real income in the United States, policymakers are concerned about the rising trade deficit. Which of the following scenarios best illustrates the implications of this increase on the current account balance with the European Union?
When people in the U.S. Other options are incorrect because This option suggests that higher incomes lead to more exports; This option implies that ta...
A country experiences a significant rise in real income, leading to increased consumer spending on foreign goods. Which of the following statements best categorizes the impact on the current account and trade balance?
When people earn more money, they often buy more things from other countries. Other options are incorrect because This answer suggests that more expor...
How does an increase in U.S. real income typically affect the trade balance with the European Union?
When people in the U.S. Other options are incorrect because Some might think that higher income means buying less from other countries; It's a common ...
Arrange the following steps in the correct order to explain how an increase in U.S. real income affects the current account balance with the European Union.
When people in the U.S. Other options are incorrect because This step is true but not the first one; This is a result of increased imports, not the fi...
If the increase in disposable income leads to higher imports, then an increase in exports due to foreign economic growth can be compared to: Higher real income in the U.S. : Increased imports from the EU :: Increased economic growth in the EU : ?
When the EU grows economically, they buy more from the U.S. Other options are incorrect because Some might think that if the EU grows, they would buy ...
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